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Piper Jaffray is out with a research note this morning, where its analysts pondered the detachment between company fundamentals within the semiconductor industry and their recent market performance.

The analysts said, “In our view, there is a significant disconnect between investor sentiment and semiconductor industry fundamentals. Investors believe semiconductor companies are the last to know, and we believe that the industry is a leading global economic indicator. Investors' concerns about weak macroeconomic conditions in developed economies are, in our view, priced into semiconductor share prices.”

“However, investors are missing vibrant growth in the developing world and the impact of a growing global middle class on chip demand. We see strong secular demand for communications infrastructure as well as industrial equipment. While each subsector has its ebbs and flows, overall chip demand remains robust with no evidence of inventory accumulation. This is coupled with a chronic shortage of capacity that was created by a decade of consolidation and punctuated by the impact of the recession.”

They noted, “We believe there is a fundamental shift in demand growth for consumer electronics from developed economies to developing economies. This is exemplified by TV demand driven by the World Cup for the first time. After a decade of under investment, we believe that communication infrastructure is driving chip demand to support wireless data and the connected TV. We are seeing robust demand for chips used in the industrial sector benefiting Linear Technology Corp. (NASDAQ: LLTC) and Altera Corp. (NASDAQ: ALTR).

Piper Jaffray analysts also noted that chip supply growth remains constrained, ending by saying, “We believe lead times for analog products are extended. We have heard of lead times as long as 25 weeks. Analog semiconductors are pervasive and used in every product with electronics. The industrial market is seeing strong demand and driving growth at companies like LLTC. In addition, energy efficiency requirements are driving more analog content as well. Even the lowly light bulb (LED light bulb) will need a regulated power supply driving analog demand, benefiting POWI. We believe the best-positioned analog companies include: LLTC, Monolithic Power (NASDAQ: MPWR), Power Integrations Inc. (NASDAQ: POWI), Silicon Laboratories (NASDAQ: SLAB) and Volterra Semiconductor Corp. (NASDAQ: VLTR).